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Saturday, May 15, 2021

For Tesla Service Is The Key To Success

According to Tesla's Q1 2021 financial update, worldwide they have 561 store and service center locations. According to this search, about 120 of those service centers are in the US. Additionally, Tesla has 923 technicians in their mobile service fleet (rangers). Both of these (service locations and mobile service) are growing significantly (28% and 22% YoY respectively).

Although the growth is significant, it pales in comparison to the vehicle delivery growth (109% over the same year). Today, (and since 2019) Tesla is having (has been having) trouble keeping up with the load on service. You can find a long series of service complaints from Tesla owners. At the current growth rates, it does not look like this will be solved anytime soon. Service should be growing at a rate similar to vehicle delivery, not one-third to one-quarter the rate.

Compared To Other Auto OEMs

How does Tesla compare to other auto companies? Not surprisingly, Tesla does things very differently than the legacy companies. Legacy companies have dealerships. These dealerships are where most owners of legacy car brands have their vehicles serviced. 

Toyota (including Lexus) has about 1,500 dealerships in North America. 

Ford (including Lincoln) has about 3,000 dealerships in the US. 

GM has about 3,000 (mostly Chevy) dealerships in the US.

These legacy dealerships significantly outnumber Tesla's 120 service centers (you might even say an order of magnitude). Tesla's model of mobile service for many repairs certainly helps fill some of the gap (and, I can attest, it is far more convenient), but as Tesla continues to increase sales (approaching the levels of the above 3), they will have to increase service. It is vital to the customer satisfaction experience. 


Tesla does not advertise because word-of-mouth from happy customers brings in more customers. As Tesla continues to move from the enthusiast market into the mainstream, service will continue to become more important in order to have happy customers. People don't want to wait weeks for repairs. It's true that EVs don't need as much maintenance as gas-powered cars, but that does not mean that they will be issue-free; life happens and buyers want to have their car repaired and get back on the road quickly.

To this end, Tesla will need to significantly grow their service offerings at a rate that resembles their delivery rate.

Disclosure: I'm long TSLA

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